GREENSPAN: The US is producing oil that has nowhere to go

Former Fed Chair Alan Greenspan appeared on Bloomberg TV Friday
to talk about the oil market.

Specifically, he zeroed in on the problem going on in the US
market: basically, production hasn't dropped like people expected
it to, and it's largely illegal to export American crude, so all
of the excess oil is building up in storage.

Because of those things, Greenspan thinks that the price of WTI
crude, the US benchmark for oil prices, is going to keep going
lower.

Here's what Greenspan said:

If you look at the data, as you just pointed out, our major
domestic facility is in Cushing, Oklahoma, which is delivery
point for West Texas Intermediate crude contracts. We are at the
point now where, at the current rate of fill, we’re going to run
out of room in Cushing by next month.

And then the question is -- where does the crude go? Because
everyone's forecast as to what was going to happen when prices
collapsed was a sharp curtailment in shale oil production. That
has not happened. The weekly figures, which are produced by the
Energy Inter-Nation (sic) Agency through March the 6, show a
continued rise in domestic crude production and it has got no
place to go, because we can’t legally export the way we would for
most products. We can do a little exporting and Canada, but
essentially, we’re bottling up a huge amount of crude oil in the
United States.

So that the West Texas Intermediate price is running $10
a barrel on the Brent crude, which is the global price. And that
basically means that we are creating great abnormalities in the
system. And unless and until we find a way to get out of this
dilemma, prices will continue to ease because there’s no place
for that oil to go except for into the markets. And spot
crudes are especially vulnerable because of so-called contango is
a very high level, and that implies that there’s a very, very
significant set of pressures on the spot price.

So, the US either needs to produce less or figure out a way to
export oil.